Market Commentary 13th January 2026 – from Jamie Annand

The FTSE 100 posted a record 10,128-point on Friday as energy, defence, and mining stocks lifted the index back into positive territory after falling consecutively on Wednesday and Thursday. Speculation over undervalued stocks in the FTSE 250 appeared to spark the growth seen in the mid-cap index.

The S&P Global UK Construction Purchasing Managers’ Index  (PMI) rose to 40.1 in December of 2025 from the over-five-year low of 39.4 in the previous month, but the reading still reflected a full year of monthly contractions for the second-sharpest decline since the Covid pandemic shock to the sector. Research found that clients delayed investment decisions into the sector due to uncertainty of how the UK’s new budget would affect future sales. While the UK’s construction activity fell for the 12^th month straight, the S&P Global UK Services PMI was revised lower to 51.4 in December 2025, still marking the eighth consecutive month of expansion in the services sector.

France’s CAC 40 climbed 1.4% to close at a record high of 8,362 on Friday, extending the prior session’s gains and securing a weekly advance of 1.8%, driven by strength in luxury names and a sharp rally in banking group BNP Paribas. Meanwhile, France’s macroeconomic struggles appear to be persisting, with their trade deficit widening, household spending falling, and industrial output falling.

In contrast, Germany’s industrial output rose 0.8% month on month in November 2025, beating forecasts of a 0.4% decline. Germany’s DAX pushed to new highs with defence stocks surging as traders began considering ongoing geopolitical concerns.

US stocks closed at record highs on Friday as investors reacted to the December jobs report and awaited potential Fed guidance. The December report showed nonfarm payrolls increasing by 50,000, below expectations, while the unemployment rate fell to 4.4%, signalling a labour market that remains steady but with slow growth. Markets continue to assess the potential impacts of Venezuelan oil imports after the US Government seized Nicolás Maduro.

Q3 2025 data showed that nonfarm business sector labour productivity in the US had grown by 4.9%, surpassing forecasts of 3%, and marking the strongest advance since Q3 2023. This was paired with an unexpected fall in unit labour costs in the US for Q3, falling by 1.9% in the nonfarm business sector.

In China, Consumer price inflation in December rose at its fastest pace in nearly three years, fuelled mainly by higher food costs. As defence and AI-linked stocks led the gains, investor confidence appeared to be reinforced by the People’s Bank of China pledging to lower the reserve requirement ratio and cut key policy rates to support monetary conditions.

Although the Nikkei 225 posted an overall positive gain, Japanese shares suffered last week with downward pressures appearing to be caused by profit-taking-led losses in the technology and financial sectors. Japan’s S&P Global Services PMI eased to 51.6 in December 2025, below the estimate of 52.5 and November’s reading of 53.2. While marking the lowest level since May 2025, the latest result pointed to a ninth straight month of increase in services activity.

Growing confidence in the easing UK inflation as well as improved confidence in the government’s fiscal plans has allowed the Bank of England to begin cutting interest rates, with investors eyeing further cuts as early as April 2026.

GBP / EUR – Current 1.1519 Previous 1.1484

The sterling continued to weaken against the dollar last week, with a 0.39% drop, whilst the sterling strengthened against the Euro by 0.30%

Although the sterling weakened against the dollar across the week, the sterling hit a 14-week high on Monday last week, with the GDP-USD exchange rate reaching 1.35, the highest since September 2025. Markets expect the Fed to cut rates at least twice this year, with a small chance of a third reduction, which continues to pressure the dollar. Geopolitical tensions also remain in focus after the US ousted Venezuela’s president, Nicolás Maduro.